The Goal Seek function is a valuable feature that lets the user back into the value for an unknown variable in an equation. For example, the typical financing arrangement for leasing a car will usually provide an interest rate and lease term, such as 6% over 60 months for a car valued at $25,000. Using the PMT formula in Excel, the estimated payment for these lease terms is $483.32.
Here is the layout of the key variables, as well as the output provided by Goal Seek:
|
Car Loan Repayment Schedule |
|
|
Interest Rate |
0.06 |
|
Loan Duration |
60 |
|
Total Loan Amount |
25000 |
|
Payment |
$483.32 |
But let's say you have a few extra dollars and are interested in knowing how long the loan will last when you spend $500 a month for the same 6% interest rate. Using Goal Seek, here is what the inputs would look like:
According to Goal Seek, upping the monthly payment slightly would shave more than two months off the loan duration. Here are the outputs:
|
Car Loan Repayment Schedule |
|
|
Interest Rate |
0.06 |
|
Loan Duration |
57.6801385 |
|
Total Loan Amount |
25000 |
|
Payment |
$500.00 |
Guide To Excel For Finance: HLookup And VLookup
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